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April's Lowdown

April 2003, Volume 5, Number 4

Edited by Jim Hightower and Phillip Frazer

Now Nike demands the right to lie

How a clerical error made corporations “people”

There’s a historic date that our country ought to mark every year, which has had as great an impact on the world as the July 4th birth of American democracy itself. The date is May 10, 1886—the day corporate supremacy was born. It came about through a court case that breathed life into these artificial, anti-democratic entities—a move that effectively gave corporations greater power than We the People.How a clerical error made corporations “people”

The reason that today’s Powers That Be (which are—big surprise!—corporate powers) don’t want us paying the slightest bit of attention to this momentous date is that the birth of corporate supremacy actually was illegitimate, carrying no force of law.
An old proverb says: “A lie repeated 1,000 times becomes the truth.” This particular lie asserts that every corporate business structure is, in the eye of the U.S. Constitution, equal to real human beings, possessing all the rights of people.

As bizarre as it is, this assertion has been repeated so often by CEOs, politicians, pundits, professors, and judges that it is now assumed to be unassailable truth. Again and again, we hear the establishment speak of the “right” of this or that corporation to do as it pleases, as if the founders themselves had contemplated this as part of their grand democratic design.

Horse dooties. Not only are corporations unmentioned in the Constitution, but the founders would upchuck at the very idea that these things would now be treated by any serious person as part of the natural order.

A little history

The corporation was perceived by the founders to be a beast that was, by its nature, a threat to a people’s democracy. Not only had the rebels battled the autocratic King George III, but they specifically went to war against the plutocratic imperialism of British trading corporations that were imposing their private will on the colonies.

In the Boston Tea Party, it was not the King’s ships that were boarded by the Sons of Liberty, but three ships of the British East India Company. It was corporate tea that they dumped into Boston Harbor (an act that today’s Limbaughs and O’Reillys would decry as Marxist-inspired vandalism against the sanctity of corporate property rights).

Jefferson, Madison, and others knew that corporations are inherently anti-democratic constructs of the wealthy elite, allowing the controlling investors to do two dangerous things: 1. amass more money than the public can muster—money to elevate their private interest above the common good; and 2. absolve them from responsibility for the damage done by their corporation.

This last advantage is especially mischievous. If an individual business owner or partnership defrauds, kills, pollutes, or otherwise acts badly, the owners pay the price. But if a corporation does the bad, the owners don’t go to jail or pay the fines. The corporate structure creates a one-way wall: It allows the owners to reap all of the profits of corporate activity, while they are protected from any responsibility for corporate illegalities.

A sweet deal for them—though we know what a sour deal it has been for workers, consumers, environmentalists, small businesses, communities, taxpayers, and the general public.

From the start, the corporate structure was the exact opposite of democracy, and its single-minded pursuit of private gain was at odds with the public good. The founders knew that this anti-democracy bomb had to be tightly controlled, so the state charters authorizing each corporation to exist served as rigorous watchdogs for the public interest.

To get a charter, a corporation:
Had to have a public purpose, from building canals to providing education (Harvard University, for example, was the first U.S. corporation). If it failed to perform its public purpose, the corporation was dissolved.

Was limited in what business it could pursue, was not allowed to buy other corporations, and could amass only a certain level of capital.
Faced term limits, with its charter usually expiring after 15 or 20 years, requiring it to seek renewal.

Had to treat farmers, small businesses, and other suppliers fairly and responsibly.
Was strictly prohibited from engaging in lobbying or political campaigns.
Jefferson, Madison, and others actually wanted an eleventh amendment in the Bill of Rights. As described by Thom Hartmann in his book about the rise of corporate dominance, Unequal Protection: “Jefferson kept pushing for a law, written into the Constitution as an amendment, that would prevent companies from growing so large that they could dominate entire industries or have the power to influence the people’s government.”

Referring to “artificial aristocracies,” Jefferson pushed for a formal declaration of “freedom of commerce against monopolies.” The chief reason that this was not included in our constitutional protections is that other founders felt it was simply unnecessary, since corporate power was so universally condemned at the time and was considered to be held in check by the vigilant state-chartering process.

If only they had heeded Jefferson’s warnings that the corporation is an incorrigible beast that will not—cannot—restrain itself, and perpetually seeks to expand its reach, wealth, and power beyond whatever limits society draws!

While the people continued to favor strict restraints, by the time of the Civil War, corporate fiefdoms were growing with industrialization, and the war itself fueled these new empires with rich government war contracts.

(Some things never change: Just days into this latest war with Iraq, Bush Inc. shamelessly awarded the first pile of Iraq-reconstruction money to a subsidiary of Dick Cheney’s old company, Halliburton. The exact amount of the multimillion-dollar contract is “classified.”)

This rise did not go unnoticed. America’s last great Republican president, Abraham Lincoln, was appalled by the brazenness of corporate war profiteers. J.P. Morgan, for example (hailed today as an icon of corporate meritocracy), bought 5,000 defective rifles for $3.50 each from a U.S. Army arsenal, then resold them to a Union field general for $22 each and skipped off with his war profits, while the rifles exploded in the hands of the soldiers who carried them.

In an 1864 letter to his friend Col. William Elkins, Lincoln wrote: “I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed. I feel at this moment more anxiety than ever before, even in the midst of war.”

How right he was, and how quickly his dread was realized! In industry after industry, the new ruthless, monopolistic force of the Robber Barons arose in the 1870s, muscling aside competitors, bribing governors and entire legislatures, installing hack judges, chipping away at state charter limits—steadily slipping the traces of democratic control.

If you want to know the attitude of the barons as they rushed to empower their corporate entities over America’s democratic pretensions, hear the words of railroad monopolist Cornelius Vanderbilt: “What do I care about the law? H’ain’t I got the power?”

This time it's personal

They had the power and the money, but in 1886, they reached for the ultimate legal sanction to imbue their financial empires with the natural rights of humans. This was a quiet coup, the death knell for the founders’ dream of a democratic republic, for it would put a private superpower over the people’s interest.

Not only are corporations far bigger, richer, and more powerful than individuals, but they also can live forever, don’t need clean air and water to live, can’t be put in jail, have no moral restraints of their own, and have no other goal but to keep profits flowing to their controlling shareholders.

The one thing—the only thing—that holds them in check is that the corporation itself is nothing but a thing created by We the People. It has no more rights than a cement block—it only exists by the will of the public, which grants it a charter and whatever privileges we chose to bestow (or deny). WE ARE THE SOVEREIGN.

But after the 1868 passage of the Fourteenth Amendment, which provided equal protection of the law to former slaves and all other people, clever corporate lawyers began to make claims that the corporation was not a thing, but a person.
This is stupider than B.S. on a stick, but there it was, a product of the sophistry and greed of the Robber Barons. Back then, this argument was going nowhere. No president, Congress, or court (federal or state) was willing to embrace the personhood claim, and none has ever acted to elevate the corporation to such an exalted status.

So where do we get today’s assumption that a corporation is fully entitled to the constitutional rights of the American people? It was a mistake!

The mistake came in the writing of a “headnote” to the U.S. Supreme Court’s 1886 decision in an obscure tax case called Santa Clara County v. Southern Pacific Railroad. (I’ll not burden you with any minutiae from this case, which involved, of all things, the county’s right to tax some of the railroad’s fence posts).

As Hartmann details in Unequal Protection, the railroads pushed hard in this unheralded case to get the court to rule that corporations have equal taxation and other human rights under the Fourteenth Amendment. Chief Justice Morrison Waite, a failed Ohio politico and former railroad lawyer, seemed a likely bet to do the corporate bidding—but he did not. The court decided in favor of Southern Pacific on the mundane fence-post matter, but it specifically dodged the immense issue of personhood. It held no open court discussion about it, wrote no opinions mentioning it, and rendered no judgment on it.

But a court reporter, J.C. Bancroft Davis (a former railroad official), wrote the headnote to the decision—a headnote being a summary of the case, for which reporters like Davis received a commission from the publisher of these legal documents. Davis’s lead sentence declares: “The defendant Corporations are persons within the intent of the clause in section 1 of the Fourteenth Amendment to the Constitution of the United States, which forbids a state to deny any person within its jurisdiction the equal protection of the laws.

That’s it. A clerk’s personal opinion, carrying no weight of law and misinterpreting what the court said—this is the pillar on which rests today’s practically limitless assertions of corporate “rights.” Davis later asked Chief Justice Waite whether he was correct in saying that the court had ruled on corporate personhood, and Waite responded that “we avoided meeting the Constitutional questions.”

Corporate attorneys seized on the headnote, quoting it as the law of the land, and it was not long before politicians and judges themselves joined in the farce, either because they were eager to support the corporate cause or were simply too lazy to read the actual case.

Nike grabs for more

In the century since 1886, “personhood” has been greatly expanded as grasping executives and their lawyers claimed such rights as:

A First Amendment right to spend unlimited sums of corporate money to elect their chosen candidates or lobby for special-interest laws.
A Fourteenth Amendment right to prevent local communities from favoring homegrown businesses over chain stores.
A Fourth Amendment right to prevent regulators from making surprise inspections of factories and the corporate records of polluters, meat packers, etc.

Now comes Nike, apparently juiced with its own “Just do it!” hubris, arguing in a case presently before the Supreme Court that it has another constitutional right: the corporate right to lie.

Nike is resorting to this capricious claim because a feisty fellow named Marc Kasky has put the squeeze on the multibillion-dollar sultan of sneakers. Kasky, a longtime consumer advocate living in San Diego, got PO’d back in 1998 when Nike launched a PR blitz to counter numerous news stories that its products (and profits) were being made in some of the world’s most abysmal sweatshops.

Nike put out full-page ads and open letters to consumers, loudly proclaiming that it did not use sweatshop labor—even though there was ample documentation that its stuff was soaked in sweat. In short, Nike lied.

So Kasky sued, accusing the corporation of consumer deception and false advertising under California’s consumer-protection laws. Rather than contest the charges, however, Nike lawyers tossed a legal wrench into the works, saying, in effect, “So what if we lied? It’s our own free-speech right as a corporate person to lie all we want.”

Nike’s claim is that its ads were political speech, not commercial speech—so just as a politician is free to lie by claiming to be, say, a “compassionate conservative,” so Nike can lie by claiming to be a compassionate corporation. With its battalion of attorneys, Nike won in the lower courts, but Kasky and his public-interest lawyer, Alan Caplan, pushed on doggedly, and the California Supreme Court stunned corporatists everywhere last May by ruling 4 to 3 against Nike.

Oh, the hue and cry from the Powers That Be! Nike rushed to the U.S. Supreme Court demanding a reversal of the dastardly California judges, wailing that “corporate speech” itself was under assault. It was joined by Bank of America, Exxon/Mobil, Microsoft, Monsanto, Pfizer, the U.S. Chamber of Commerce (with Ken Starr as its lawyer), every major media conglomerate, and even the Public Relations Society of America. The New York Times jumped in, warning that this ruling “poses an immediate threat to robust debate” on public policy.

Whoa! The decision does no such thing. The judges merely (and rightly) ruled that Nike was not expressing a political opinion about national sweatshop policy, but specifically was lying in order to influence consumers about the virtue of its products—a direct effort to advance its sales and profits. As one California justice wrote: “Our holding in no way prohibits any business enterprise from speaking out on issues of public importance or from vigorously defending its own labor practices. It means only that when a business . . . makes factual representations about its own products or its own operations, it must speak truthfully.”

Besides, spare me any whining about how these corporations—with the billions they spend on lobbyists, campaign donations, PR firms, etc.—might be hindered in having their say in public policy. Right now, they own public policy.

Another besides: If We the People were to decide to eliminate corporate political speech entirely (as the founders did), that’s our right as a self-governing people. Indeed, none other than Chief Justice William Rehnquist has expressed his doubts that corporations can be persons under the Constitution, and he’s written that corporations can and should be restrained from political activity.

By asserting its corporate “right” to lie and taking it to the Supreme Court, Nike may have done us a favor. Its claim goes to the core of the corporate-personhood argument, and Nike v. Kasky could be the case that prompts the court to look again at this absurdity, finally undoing the incalculable damage done to our democracy 117 years ago by Davis’s erroneous headnote.